Barclays uses cookies on this website. They help us to know a little bit about you and how you use our website, which improves the browsing experience and marketing – both for you and for others. They are stored locally on your computer or mobile device. To accept cookies continue browsing as normal. For more information and preferences go to the cookie policy (new window). You will see this message only once.

Investment Bank

Investment Bank

Share this page

Advertising's new rules of engagement

25 Oct 2017

Parsys 2

The goal of advertising hasn’t changed in more than a century: Grab your target’s attention, engage them in your message and get them to act. But what if this paradigm no longer applies? The future of advertising suggests it soon may not.

Marketing technology and advertising media are changing fast. And consumer expectations are changing just as quickly. Consumers are no longer interested in, and sometimes actively resent, the passive, “lean-back” approach to advertising — TV, radio, and internet banner ads that break the flow of their daily lives. Yet more active, “lean-in” approaches like clickable search ads and online video commercials are losing favour too: They require consumers to actively engage with technology, using unnatural communication tools like keyboards and computer mice.

Advertising, and how it is consumed, is distinguished by the degree of activity expected of the consumer

Source: Barclays Research

A new kind of stealth marketing

New technologies and troves of consumer information are changing the nature and delivery of advertising messages. These technologies — voice recognition, artificial intelligence (AI), advanced algorithms, augmented reality, the Internet of Things and smart speakers — are coming together to blur the distinction between “lean-back” and “lean-in” experiences and create new, friction-free marketing.

Consumers already use their voices to dictate email, add to online shopping carts, update calendars and more, sometimes through smart speakers, like Amazon’s Echo and Google Home. Devices constantly record consumer concerns, queries, location, activity, interactions and health stats. The continuing influx of the Internet of Things will take this even further: Speakers, microphones and movement sensors scattered around the home, the office and the car will pick up conversation and activity, giving advertisers even greater access to data on how we live and behave.

Lean-in platforms are merging with lean-back platforms

Source: Barclays Research

Advertisers are also beginning to take advantage of more natural forms of communication, especially voice and visual inputs, to deliver ads that seamlessly become part of consumers’ day-to-day lives — and obliterate the distinction between content and advertising. Without most consumers realizing it, algorithms increasingly determine the routes they drive, songs they listen to, shows they watch, websites they visit, books they read and products they buy.

Omnipresent and invisible

Prominent early adopters are only beginning to scratch the surface of the future of advertising. Google Search is a prime example of content merging with advertising. The top-five search results, where paid ads display, generate more than 50% of clicks.

Companies like Tesla Motors are capitalising on this new advertising reality. Its marketing plan lets its unique engineering — and Elon Musk, its celebrity CEO — do the talking, through YouTube videos, Reddit posts, TV news, even film cameos. Word of mouth does the rest. Its advertising budget? Zero.1 It’s market value? Nearly $60 billion.2

Brands like Red Bull are also devising strategies so creatively integrated across content and advertising that consumers are less aware they’re part of the marketing engine. With every extreme video that Red Bull produces — and its loyal followers eagerly share — the company reaps millions of impressions.

Ads are becoming ever more attuned to context. For example, you’re thinking about dinner, so you ask Alexa for fried chicken recipes; you’re offered one sponsored by a poultry company; you tell Alexa to have your local online grocer deliver three pounds of that company’s chicken that afternoon.

The great virtue of contextual knowledge at this level is that the target audience is much further down the marketing funnel than when viewing other kinds of ads, meaning they are ready and willing to buy.

The rules of consumer engagement in advertising are changing rapidly. New technologies are making ads both easier to consume and easier to respond to. How far advertisers take these new methods, and how consumers ultimately respond to them, remains to be seen.

One thing is certain, though: Advertising will become even more integrated into consumers’ daily lives.

Related content

Glossary

Parsys 4

About the lead analyst

Kannan Venkateshwar joined Barclays in September 2008 and is currently a Director covering the U.S. Media, Cable & Satellite Communications sectors. Kannan has 13 years of experience across corporate and investment banking.

Prior to joining Barclays, Kannan was with Lehman Brothers working on cross asset strategy research as a generalist covering multiple sectors. Prior to Lehman, Kannan worked at Bank of America and Citigroup in corporate banking, looking at multiple industries.

Kannan earned a B.A. in Economics from University of Madras, India and an M.B.A. from the Darden School, University of Virginia. Kannan also has a post graduate diploma in management from the Indian Institute of Management, Bangalore.